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AIG succumbs to political will, names recipients

In a surprise move, American International Group (AIG), a beleaguered insurer, has revealed the recipients of $105.3 billion-worth of federal funds after coming under intense pressure from politicians to do so.

Central Banking staff

16 Mar 2009

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In a surprise move, American International Group (AIG), a beleaguered insurer, has revealed the recipients of $105.3 billion-worth of federal funds after coming under intense pressure from politicians to do so.

The insurer, which has so far received more than $170 billion in state aid, said on Sunday that it had paid more than $93 billion worth to banks across the globe. Goldman Sachs, an American investment bank, was the biggest recipient, receiving $12.9 billion. Societe Generale, a French bank, was the second largest, receiving with $11.9 billion, followed by Deutsche Bank, a German lender, with $11.8 billion and Barclays, a British bank, with $8.5 billion.

American states were given $12.1 billion, which was linked to guaranteed investment contracts, structured investments with a guaranteed rate of return and municipalities use them to invest their proceeds from bond issuances until the funds are needed. California and Virginia were at the top of the list, getting more than $1 billion each.

The payments were for three types of transactions:

the provision of collateral to back up credit default swaps ($22.4 billion);

the purchase of the collateralised default obligations ($27.1 billion); and

payments to counterparties of a securities lending program ($43.7 billion).

The data do not include payments made after 31 December.

The disclosures come after a raft of Congressional pressure for the insurer to reveal the recipients of the taxpayer funds.

Both Ben Bernanke, the Fed chairman, and Donald Kohn, his deputy, have told Congress that they have been angered by the bailout of AIG. However, Kohn last week refused to disclose the recipients of the aid, saying: "We need AIG to be stable and continue in a stable condition. And I would be very concerned that if we started giving out the names of counterparties here people would not want to do business with AIG."

Fed came to the insurer's rescue last autumn with an $85 billion emergency loan. This has been followed by three further bailouts, the latest of which came earlier this month after the company announced losses of $61.7 billion for the fourth quarter of last year, the highest quarterly loss in American history. The state owns 80% of the firm.